ESAB trims its profit target after record sales
Acquisitions lifted revenue, but the welding and inspection supplier lowered its forecast for underlying growth and core earnings.
ESAB's record quarterly sales have not translated into a higher annual profit target. The welding and inspection supplier lowered its outlook for growth excluding acquisitions and currency effects, alongside its core adjusted earnings forecast.
The new core adjusted EBITDA range of $603 million to $607 million sits entirely below the $615 million to $625 million range issued in August. EBITDA measures earnings before interest, taxes, depreciation and amortization; the adjusted measure also removes specified costs. Core adjusted earnings per share fell to $5.28 to $5.33 from $5.40 to $5.50. Research by Ticker Byline shows that both forecasts already included the Eddyfi acquisition and its financing.
ESAB now expects core organic sales growth of 1.6% to 2%, down from 2% to 4%. Its core measures exclude Russia; organic growth also strips out acquisitions and currency movements.
Acquisitions lift the headline
Third-quarter reported revenue reached $824.5 million, up from $727.8 million a year earlier. Eddyfi, the inspection-technology business acquired in June, contributed $62.8 million of sales.
Core organic growth was positive in both operating regions. Core adjusted EBITDA rose to $156.1 million from $133.4 million. The reduced annual forecast therefore follows a quarter of higher underlying sales and higher adjusted operating earnings.
The acquisition also changed the capital structure. ESAB used debt and new equity to help fund the purchase. Mandatory convertible preferred stock carries dividends before converting into common shares; it is separate from ordinary borrowing.
Cash generation trails the expansion
Operating cash flow for the first nine months was $153.0 million, compared with $163.5 million a year earlier. ESAB reported adjusted free cash flow of $140.9 million, which adds back acquisition-related and discontinued-operation cash payments as well as deducting capital spending.
At quarter-end, the company held $188.6 million in cash and cash equivalents against approximately $2.347 billion of debt principal. About $51 million of that cash was held in Russia, where withdrawals can be delayed.
The ESAB company profile separates reported results, core earnings, acquisition funding and cash flow.